Portland-based Source secured $8.1 million of what will be an $8.5 million Series A.
The round was led by new investor Los Angeles-based M13. Existing investors Rogue Venture Partners, Oregon Venture Fund, Founders Coop, Graham & Walker, Rise of the Rest and MetaProp also participated, said Source founder and CEO Nicole Schmidt.
Source works in the architectural and construction industry. It has an online platform that helps professionals in construction and design streamline the process of finding materials, obtaining samples and sourcing final orders. The company has a massive database of products and a waiting list of manufacturers to participate. It specializes in multifamily, hospitality and commercial projects.
Related: LA venture fund M13 lands in Portland with latest investment
The company has grown quickly over the last year, going from 21 employees in summer of 2022 to 40 today. It has also made three acquisitions in that time. The company was profitable prior to the new funding.
“We weren’t specifically looking to raise capital,” Schmidt said of the round, which was revealed in regulatory filings. “We got to profitability as a company. We had really good growth metrics. We are 10x-ing revenue for the second year in a row. We have the metrics to be at a place where we are looking for investment capital, not to cover burn rate, but expand fast on something working really well.”
Schmidt said it was the growth metrics that set the company apart in a challenging time for raising venture capital. Venture activity in Portland reflected national trends of a big slowdown. In the first half of this year deal volume in the Portland metro was down 21% compared to the first six months of last year while the amount of money invested in startups sank 69%.
“Whatever the environment is, if you have strong metrics you can raise capital,” she said. Schmidt has always had a focus on solid business fundamentals. For founders who have focused on building business models and securing customers those fundamentals shine in an environment like today she added.
As part of this deal M13 partner Anna Barber is joining the Source board.
Barber was impressed by the team Schmidt has built and their deep understanding of the problem the platform is solving.
“The team’s DNA is in the commercial construction industry,” she said. “They are not technologists coming in from the outside to build technology (for an industry) but not understanding how the business works. The team and Nicole deeply understand the mechanics of getting a commercial construction project done and what is important to customers.”
Schmidt connected with Barber, who spearheaded the deal on M13’s end, through Source’s existing investor Caroline Lewis. Initial talks with Barber happened six to nine months ago, said Schmidt but the women reconnected a few months ago and informal talks turned into a deal.
Talking to Barber and M13 fits into Schmidt’s overall strategy when it comes to funding her company. It’s a strategy she has learned over the years as a woman founder trying to raise investment capital. In 2021, a record year for VC investment activity in the Portland metro, just 3% went to companies founded by women.
Schmidt’s strategy is to now only pitch firms that have women in general partner or decision-making positions.
Source is hiring. Schmidt is looking for software engineers, purchasing team members and sales people.
This funding will allow the company to invest in its procurement business, which is driving much of the growth. This part of Source’s platform helps customers buy furniture and any item in a project that isn’t physically attached to a building during construction.
“We are really looking forward to investing in the technology. That is one of the things that sets us apart beyond what other folks are doing,” Schmidt said. “We do have integrated tech from the very early stages of a project through purchasing.”
Despite challenges in the commercial real estate market, Source has seen business growth. Schmidt said the company’s focus on multifamily housing — including senior and student housing — and hospitality have offset any office challenges. Additionally, as office needs have changed and buildings are renovated for reduced tenant footprints, the company still sees business from those projects.
